What Is a Market Economy? A market economy is an economic system in which economic decisions and the pricing of goods and services are guided by the interactions of a country’s individual citizens and businesses. There may be some government intervention or central planning, but usually this term refers to an economy that is more
What Is Market Efficiency? Market efficiency refers to the degree to which market prices reflect all available, relevant information. If markets are efficient, then all information is already incorporated into prices, and so there is no way to “beat” the market because there are no undervalued or overvalued securities available. The term was taken from
What Is Market Exposure? Market exposure refers to the dollar amount of funds or percentage of a broader portfolio that is invested in a particular type of security, market sector, or industry. Market exposure is usually expressed as a percentage of total portfolio holdings, for instance, as in 10% of a portfolio being exposed to
What Is Market Failure? Market failure, in economics, is a situation defined by an inefficient distribution of goods and services in the free market. In an ideally functioning market, the forces of supply and demand balance each other out, with a change in one side of the equation leading to a change in price that
What Is Marketing? Marketing refers to activities a company undertakes to promote the buying or selling of a product or service. Marketing includes advertising, selling, and delivering products to consumers or other businesses. Some marketing is done by affiliates on behalf of a company. Professionals who work in a corporation’s marketing and promotion departments seek
What Is Marginal Benefit? A marginal benefit is a maximum amount a consumer is willing to pay for an additional good or service. It is also the additional satisfaction or utility that a consumer receives when the additional good or service is purchased. The marginal benefit for a consumer tends to decrease as consumption of
What Is the Marginal Cost of Funds? The term marginal cost of funds refers to the increase in financing costs for a business entity as a result of adding one more dollar of new funding to its portfolio. As an incremental cost or differentiated cost, the marginal cost of funds is important when businesses need to make
What Is Marginal Cost? In economics, the marginal cost is the change in total production cost that comes from making or producing one additional unit. To calculate marginal cost, divide the change in production costs by the change in quantity. The purpose of analyzing marginal cost is to determine at what point an organization can
What Is the Marginal Propensity to Invest (MPI)? The marginal propensity to invest (MPI) is the ratio of change in investment to change in income. It shows how much of one additional unit of income will be used for investment purposes. Typically, people will only invest a portion of their income, and investment increases when income
What Is the Marginal Propensity to Save (MPS)? In Keynesian economic theory, the marginal propensity to save (MPS) refers to the proportion of an aggregate raise in income that a consumer saves rather than spends on the consumption of goods and services. Put differently, MPS is the proportion of each added dollar of income that
